by John K. Halvey

In the past 15 years, two dozen major transactions have shaped and defined the IT outsourcing world. Involving many Fortune 500 companies, these deals have amounted to over $100 billion in outsourced services.

The announcements at the end of 2002 of several large IT outsourcing deals, including a $2.5 billion/10-year European outsourcing agreement between Deutsche Bank and IBM, $5 billion/7-year IT outsourcing agreement between JP Morgan Chase and IBM, and the $650 million/10-year HRO deal between Motorola and ACS, brought focus to the ongoing question as to which deals have been the most influential in shaping the outsourcing industry. The concept of most influential-like that of beauty-is, of course, in the eye of the beholder and so we set out to come up with a list of the 24 most influential deals of the past 15 years. For this purpose, we were looking for deals that started a trend, stopped a trend, and introduced a new paradigm into the marketplace or simply through their size lead to bigger and better transactions. The results of this effort are set forth in the accompanying chart: a list of the Top 24 most influential information technology outsourcing deals. The deals are diverse in their size, structure, and breadth.

In some cases, the sheer size of the deal is what makes it notable, e.g., the $32 billion, worldwide outsourcing between General Motors and EDS; the $15 billion deal between Nippon Telegraph and Telephone and IBM; and the $5 billion outsourcing arrangement between Commonwealth Bank of Australia and EDS that introduced the concept of equity-based outsourcing

While the frequency at which we are seeing these "mega-deals" (i.e., deals valued at over $1 billion) continues to impress and speaks volumes about the IT outsourcing industry, size is not all that matters. In some instances, the structure of the deal is what makes the arrangement significant. In the 1990s we saw the creation of strategic alliances such as the Pinnacle Alliance in 1996 and the now-troubled alliance between MCI WorldCom and EDS in 1999.

As the IT outsourcing industry has matured, we continue to see innovation. For example, AT&T Corp.'s $2.6 billion, five-year customer care outsourcing deal with Accenture Ltd. has been dubbed a "co-sourcing" arrangement; the recent $1.1 billion outsourcing arrangement between UK retailer The Boots Co. and IBM calls for the creation of a research and development center in Nottingham; and the American Express/IBM IT outsourcing arrangement penned in February 2002 broke new ground with a la carte pricing.

Turmoil can also make a deal notable. EDS and Xerox entered into a landmark 10-year, $3.2 billion outsourcing arrangement in 1994. By 1999, in an unprecedented move, EDS had filed suit against Xerox for nonpayment of fees. The companies reconciled by November of 2001 with the signing a $1.5 billion, five-year extension to their outsourcing contract and a $50 million contract to include Xerox products in EDS' Navy deal. In the end, the outsourcing relationship proved to be resilient.

For other deals, it is the efficiency and adaptability of the outsourcing relationship that makes them noteworthy. General Dynamics and CSC entered into a 10-year agreement in 1991. The companies have renegotiated the contract twice, in 1993 and again in 1998, and have changed scope, pricing, and performance levels over the course of 10 years.

Taken together, this list provides a picture of the information technology outsourcing market from the precedent setting deals of the market's nascence-such as Kodak/IBM; Dupont/CSC/Anderson; General Dynamics/CSC; and EDS/Xerox to the truly innovative deals of today-such as AT&T/Accenture; American Express/IBM; and The Boots Co./IBM.

1. February 25, 2002: $4 billion / 7-year utility based deal between American Express and IBM
2. March 1994: $3 billion / 10-year IT services between Xerox and EDS
3. 1996: $4.5 billion / 10 year outsourcing and strategic alliance agreements between Dupont and CSC and Andersen Consulting
4. February 1998: $3 billion application development and maintenance agreement between BellSouth and Andersen Consulting
5. December 1998: $4 billion infrastructure outsourcing agreement between BellSouth and EDS
6. July 1989: $250 million / 10-year data center operations agreement between Kodak and IBM Corp., Digital Equipment Corp., and Businessland Inc.
7. February 1999: $5 billion - $7 billion / 10-year applications development and maintenance and infrastructure services agreement between MCI Worldcom and EDS (2/99) / $6 billion - $8.5 billion / 10-year voice and data communications services between EDS and MCI WorldCom
8. December 12, 2002: $4.5 billion / 10-year end-to-end network management services deal between Bank of America and EDS
9. August 1997: $5 billion IT outsourcing between Commonwealth Bank of Australia and EDS
10. October 1997: $2.9 billion / 10-year outsourcing between Telstra and IBM Global Services Australia
11. October 1998: $420 million / 7-year mainframe and midrange computing and help desk services agreement between Bank One, Corp and IBM and $1.4 billion / 6-year outsourcing agreement between Bank One, Corp. and AT&T Solutions
12. October 1998: $2 billion / 5-year outsourcing between Boeing and IBM Global Services
13. September 1998: $3 billion 10-year computing infrastructure services agreement between Cable & Wireless Communications and IBM
14. 1996: $32 billion worldwide outsourcing between General Motors and EDS ('84 renegotiated)
15. December 1999: $650 million network outsourcing agreement between BP Amoco and MCI WorldCom
16. November 2000: $15 billion / 10-year computer services outsourcing agreement between Nippon Telegraph and Telephone and IBM
17. August 2000: $3 billion / 7-year agreement to deliver global desktop and help line support, computer infrastructure management, legacy application development, and support and data center management services between Nortel Networks and CSC
18. May 1998: $3 billion / 10-year outsourcing between General Dynamics and CSC ('91) (renewed for additional 3 years at an estimated value of $500 million)
19. 1996: $ 2 billion / 7-year agree-ment between J.P. Morgan and multiple vendors-CSC, Andersen Consulting, AT&T Solutions and Bell Atlantic Network Integration (The Pinnacle Alliance)
20. October 4, 2002: $1.1 billion IT outsourcing Agreement between The Boots Co. and IBM (UK)
21. January 2002: $2.5 billion / 5-year outsourcing agreement between AT&T Corporation and Accenture
22. December 2002: $650 million / 10-year aggregated Human Resources outsourcing deal between ACS and Motorola
23. December 2002: $2.5 billion / 10-year European outsourcing agreement between Deutsche Bank and IBM
24. December 2002: $5 billion / 7-year IT outsourcing agreement between JP Morgan Chase and IBM